P2P Bitcoin exchange Hodl Hodl launches lending with no KYC

Non-custodial peer-to-peer (P2P) Bitcoin (BTC) exchange Hodl Hodl announced the launch of a lending service with no know-your-customer (KYC) requirements.

In an Oct. 22 announcement, Hodl Hodl explains that the system allows anyone to become a lender or a borrower, set their own terms and create offers, all in a simple P2P Bitcoin decentralized finance (DeFi) system with no identity checks. Furthermore, the system will be borderless—nations have no meaning—with no fiat or custody.

Hodl Hodl notes that it has been quietly working on the lending system for the last couple of months and believes that it can “add huge value to Bitcoin’s ecosystem.” The company decided to implement the service after researching the leading projects from the DeFi and Bitcoin spaces. The idea is to “combine the best of these two sectors.”

No KYC requires decentralization

With a recent report indicating that most cryptocurrency firms “have weak or porous know-your-customer processes”—which enables money laundering—it is no wonder that regulators are increasingly investigating and acting against companies in the space.

As Modern Consensus recently reported, one such instance is crypto derivatives exchange BitMEX which saw U.S. regulators take particularly harsh actions against it. The exchange’s founder faces up to 10 years in jail after he was accused alongside some of his teammates of violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act by failing to put sufficient anti-money-laundering safeguards in place.

Now, Hodl Hodl and other DeFi projects are attempting to allow anonymous access to their services through decentralization. Still, recent developments suggest that U.S. authorities intend to take action against DeFi players as well.

Fiat free

The announcement quotes a June tweet by Bitcoin maximalist and co-host of the “Tales from the Crypt” podcast Matt Odell, who points out that “KYC is forever.” He then warns:

“When it comes to custodial privacy, users should choose their custodians very carefully. Your private information is valuable, start acting like it.”

Hodl Hodl notes that “KYC creates unneeded friction and barriers to entry, and storing your private data with a third-party is not very decentralized.” The absence of KYC is usually enabled by designing the system in a non-custodial way to skirt reporting requirements, which also makes it more secure and decentralized.

Lastly, Hodl Hodl’s system also does not involve fiat currency in any form to avoid the “fiat gatekeepers.” The firm explains that fiat payment institutions can block, reverse and freeze operations between peers, a risk that they wanted to exclude from the platform. The announcement reads:

“If you look at the most successful DeFi projects you will understand that they are operating without fiat involvement. Instead, fiat is replaced with stablecoins. Such an approach allows you to move the payment part into a real P2P spectrum because stablecoin payments, just like Bitcoin payments, are happening with no middleman involved.”